NEW YORK ( TheStreet) -- The schizophrenic summer continues.

The major U.S. equity indices are all now up in three straight sessions, while last week began with four down days. The overall trend since early June is positive, of course, with the Dow Jones Industrial Average, S&P 500 and Nasdaq back at their early May levels and within shouting distance of their peaks for 2012, but investors looking for substantial upside from here may risk getting greedy.

The analysts over at Bank of America Merrill Lynch have been arguing for a while now that the mega caps will outperform in the hot weather months and that call has been born out but the firm does see some question marks lurking in the technicals.

"This rally could be on stilts," the firm said Tuesday. "Bearish divergences also known as negative divergences are popping up all over in terms of price momentum, breadth, volume and in leadership indices failing to breakout (R2000 Russell 2000, MID S&P Midcap 400 and Dow transports). This can persist for weeks, but if not reversed this could signal that a pending correction is likely in the month of September."

In the near-term, B of A sees a test for the rally when the S&P 500 reaches the 1400-1425 level and thinks a test of the May 2008 peak near 1440 is possible. The firm puts key support on the downside at 1325.

The S&P 100, which contains the 100 companies with the biggest market caps in the S&P 500, is up more than 14% so far in 2012 vs. the S&P 500's 11.4% appreciation and B of A thinks more outperformance lies ahead.

"We view Mega Caps as the new market leadership," the firm wrote. "Mega Caps represent:Growth, Quality, Yield and Big Bases. The sectors benefiting are Staples, Health Care (primarily pharma), Technology, Discretionary (primarily media) and Telecom. Many of the stocks in the Mega Cap space remain under-owned by institutional investors. Additionally, nearly half of the stocks in the S&P 100 have a statistically significant short position showing investors are fading their rallies. This is contrarian bullish, in our view, as investors don't believe in the rally."

Meantime, earnings season seems to be ending with a bit of a whimper if Tuesday's after-hours disappointments (more on that later) are any indication and Jefferies pointed out a disturbing coincidence in its commentary on second-quarter reporting season earlier in the day.

"The ongoing distractions from Europe and last week's series of central bank meetings interrupted the conclusion of the US 2Q earnings season," the firm said. "As we highlighted prior to the results season, companies had already managed earnings and sales forecasts lower. Indeed, the drop in earnings revisions over the past four weeks has matched almost the declines seen during the worst period of 2008."

As for Wednesday's scheduled news, Orbitz Worldwide ( OWW) is slated to offer up its second-quarter results before the opening bell. The online travel reservation company is already seeing some selling pressure after Priceline.com ( PCLN) gave an underwhelming outlook after the close.

The average estimate of analysts polled by Thomson Reuters is calling for a profit of a nickel a share in the June-ended period from Orbitz on revenue of $207.7 million. The stock is up more than 15% so far in 2012 and hit a new 52-week high of $4.75 in Tuesday's regular session so the stakes are elevated ahead of this print.

The sell side, though, is still skeptical with 8 of the 9 analysts covering the shares at either hold (7) or underperform (1) and the 12-month median price target sitting at $4, implying potential downside of 14% to Tuesday's close at $4.66.

Benchmark, however, is the lone bull on Orbitz. The firm rates the stock at overweight with a $6 price target and said before Tuesday's trading that it believes the shares "offer excellent value with meaningful upside at current levels." Benchmark is looking for year-over-year growth in bookings of 5% and revenue of $210 million in the June quarter.

"We believe Orbitz is receiving only nominal credit for the turnaround in its domestic leisure business as a result of the global platform migration, with the AmEx American Express ( AXP) opportunity also likely understated," the firm said. "We also note that, while hotel only accounts for roughly 37% of revenue, the AmEx partnership should increase Orbitz' hotel exposure to just over 40%, while further growth in private label, packages and standalone hotel could drive hotel to 50% of revenue within 2-3 years."

Based on that potential for a surge in revenue from hotel reservations, Benchmark thinks the shares merit a higher multiple.

"Orbitz trades at 10x our 2012E EPS of $0.42 and 8x our 2012E EBITDA of $140 million compared with our eTravel group at 19x and 12x, respectively," the firm said. "We believeOrbitz may record rebounding profit growth by growing hotel exposure and expanding its private label partnerships. We believe a multiple of 14x 2012E EPS, or 9x EBITDA, is reasonable, resulting in a price target of $6 per share."

Check out TheStreet's quote page for Orbitz for year-to-date share performance, analyst ratings, earnings estimates and much more.

Other companies reporting before the bell include Alpha Natural Resources ( ANR), Computer Sciences Corp. ( CSC), Consolidated Graphics ( CGX), Dean Foods ( DF), EchoStar Communications ( DISH), International Flavors & Fragrances ( IFF), Macy's ( M), Polo Ralph Lauren ( RL), Retalix ( RTLX), Sodastream ( SODA), Stillwater Mining ( SWC), The Carlyle Group ( CG), Tidewater ( TDW), Toyota Motor ( TM) and Treehouse Foods ( THS).

The late roster features Allscripts Healthcare ( MDRX), Amarin Corp. ( AMRN), CenturyTel ( CTL), Diodes ( DIOD), Education Management ( EDMC), Heelys ( HLYS), Jack in the Box ( JACK), Kinross Gold ( KGC), Monster Beverage ( MNST), News Corp. ( NWS), Rosetta Stone ( RST) and SatCon Technology ( SATC).

Wednesday's economic calendar includes the Mortgage Bankers Association's weekly application activity index at 7 a.m. ET; productivity and unit labor costs data for the second quarter at 8:30 a.m. ET; and weekly crude inventories at 10:30 a.m. ET.

And finally, there were some forces aligning to knock stocks off their pedestal after Tuesday's close. On the big-picture front, Standard & Poor's went ahead and lowered its outlook on Greece to negative. Here's the money quote: ""We see the likelihood of shortfalls, owing to election-related delays in the implementation of budgetary consolidation measures for the current year, as well as the worsening trajectory of the Greek economy."

No big shocker but nevertheless could remind folks that Europe is still in teeter territory.

Then there's a batch of weak numbers after the bell. Shares of Priceline were down more than a C-note after the company said it expects non-GAAP earnings of $11.10 to $12.10 for the third quarter ending in September, well below the current Wall Street consensus estimate for a profit of $12.76 a share. The company said its outlook "reflects an assumption that economic conditions in Europe will further deteriorate."

Walt Disney ( DIS), meanwhile, was lined up to provide a headwind for the Dow as shares of the media and entertainment conglomerate were lower in late trades despite a better than expected earnings performance as it fell a bit short on the top line.

The company reported earnings of $1.83 billion, or $1.01 a share, in its fiscal third quarter ended in July on revenue of $11.09 billion vs. average estimate of analysts polled by Thomson Reuters for a profit of 93 cents a share on revenue of $11.31 billion.

While CEO Robert Iger lauded the results as "phenomenal" and noted it was "the largest quarterly earnings in the history of our company," investors took the stock, which is up more than 30% so far in 2012, down a peg. Shares were last quoted at $49.29, off 1%, on late volume of more than 540,000, according to Nasdaq.com.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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